City overpaid merchants to relocate, audit reports

Businesses displaced for west-side revival

February 06, 2002|By Scott Calvert | Scott Calvert,SUN STAFF

The city paid more than necessary - in some cases by more than $100,000 - to compensate merchants displaced by the effort to revive downtown's west side, according to an audit set for release today.

The report by Comptroller Joan M. Pratt's auditors questioned the $2.4 million the city paid to businesses for their inventory. If the program had been handled differently, the audit said, the city could have realized "substantial" savings, though the amount was not specified.

One of several problems the audit identified was that the city did not require proper documentation, making it impossible to verify the true cost of the goods. "Why should we pay more to these business owners than their inventory is worth?" Pratt asked yesterday. "This is taxpayers' money."

The city had spent $19.8 million as of May 15 to buy 30 properties and to help 32 merchants move or cover the cost of inventory. In many of these cases, the city used its condemnation power to assemble an entire block for Bank of America's $70 million Centerpoint retail and residential project.

Baltimore Development Corp., which is guiding the west-side initiative, concluded before the audit was completed that a lack of documentation and "meticulousness" raised concerns, said President M.J. "Jay" Brodie.

Brodie noted that the relocation program, previously handled by the city's Department of Housing and Community Development, has been farmed out to a private company called Diversified Services. He said a "tighter definition" of inventory would be used in the future.

But Brodie said BDC, the city's economic development agency, disagreed with one of the auditor's findings - that the city should consistently follow federal relocation guidelines to save money. Brodie said that would not necessarily be fair to merchants.

Mayor Martin O'Malley made a similar point to Brodie's last year, saying the city would not be "just kicking the merchants out with the bare-bottom minimum."

The audit said the city followed federal guidelines for moving expenses and property acquisition - but not for the cost of inventory claims. Those guidelines say merchants should receive the cost of the inventory or the cost to move it, whichever is lower.

Under the guidelines, the city could have paid Bare Feet $9,000 to move its shoes instead of $128,086 for the cost of the shoes, the audit said.

The audit also said Bare Feet's documentation consisted of "hand-written listings" of inventory, "presumably prepared by the shoe store owner or his personnel." No documents was signed or dated. Other merchants also failed to provide invoices or similar documents.

The audit also identified other overpayments totaling $82,698.

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